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CMA Intermediate · Cost Accounting · Employee Costs

Under the cost accounting treatment of employee cost, which of the following is the most appropriate way of recording abnormal idle time arising from a prolonged power failure?

Abnormal idle time from an exceptional cause like a prolonged power failure is charged to the Costing Profit and Loss Account. It is not loaded onto products or overheads, so that product costs reflect only normal and necessary expenditure.

  1. AInclude it in factory overheads and absorb it into production
  2. BAdd it to the cost of the next job in the department
  3. CCharge it to the Costing Profit and Loss AccountCorrect
  4. DCarry it forward as a deferred asset until normal production resumes

Explanation

Abnormal idle time is caused by exceptional, avoidable events such as power failure, strikes or breakdowns. Its cost should not inflate product costs, so it is written off to the Costing Profit and Loss Account. Including it in overheads is the treatment for normal idle time only.

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